A Statistical Study to Assess the Relationship between Stock Market Development and Economic Growth Using an ARDL-ECM Approach: The Case of Mauritius

Ramkelawon, N.; Khan, Naushad Mamode; Sunecher, Yuvraj

doi:10.1080/09720510.2014.943389

Cited by 3 publications

(4 citation statements)

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“…Although there are so many authors trying to explain how these two dimensions are linked together (Carp, 2012;Enisan & Olufisayo, 2009;Galariotis & Giouvris, 2015;N'Zué, 2006;Naes et al, 2011;Nurudeen, 2009;Pradhan et al, 2015Pradhan et al, , 2014Ramkelawon et al, 2015;Rousseau & Wachtel, 2000;Smimou, 2014;Srinivasan, 2014), there is no consensus about which liquidity measure and economic development variable reveal or characterise better the information contained in both dimensions and how they are linked. This tendency extends to the methodologies applied by the various authors, which lead to different conclusions about if stock market liquidity impacts on economic growth or vice-versa and about the impact of each other and its relevance.…”

Section: Economic Growth and Liquiditymentioning

confidence: 99%

“…- (Caporale et al, 2004;Enisan & Olufisayo, 2009;Galariotis & Giouvris, 2015;Levine & Zervos, 1998;Nowbutsing & Odit, 2009;Zhu et al, 2004), bank sector (Ahmad et al, 2016;Anyamele, 2010;Pradhan et al, 2014) or country's economy -for example schooling enrolment, government expenditures, unemployment rate, private and public investment, etc. - (Hou & Cheng, 2017;Matadeen & Seetanah, 2015;Ngare et al, 2014;Rahman & Salahuddin, 2010;Ramkelawon et al, 2015;Smimou, 2014). It is also commonly used the lagged dependent variable (Adjasi & Biekpe, 2006;Apergis et al, 2015;Florackis et al, 2014;Ngare et al, 2014) or other measures of the economic development of the studied country or even other main economies, mainly the United States of America (USA) (Florackis et al, 2014;Smimou, 2014).…”

Section: Economic Growth and Liquiditymentioning

confidence: 99%

“…N' Zué (2006) and Nurudeen (2009), for example, concluded that the stock market liquidity has a statistically significant negative impact on the country's economic development. There are also some authors that got different conclusions when using different variables, methods, countries or sub-samples (divided by various conditions) (Adjasi & Biekpe, 2006;Cheng, 2012;Galariotis & Giouvris, 2015;Hou & Cheng, 2017;Matadeen & Seetanah, 2015;Ramkelawon et al, 2015). For example, using a sample composed by 14…”

Section: Economic Growth and Liquiditymentioning

confidence: 99%

“…The author applied a VAR model, during the period 1973-2007, with real GDP in logarithm form as the dependent variable, turnover ratio as liquidity measure and three other financial measures as control variables. Ramkelawon et al (2015) and Matadeen & Seetanah (2015), when studying the Mauritius's stock market liquidity during the years 1989-2011 and 1988-2011, respectively, using the GDP as the dependent variable and the liquidity measures turnover ratio and value of traded shares ratio, had different conclusions when applying different methodologies or different forecasts . The first, applying the Autoregressive Distributed Lag (ARDL) method found that the liquidity had a negative impact on the Mauritius GDP, whereas when applying an ECM, the impact turned out to be positive.…”

Section: Economic Growth and Liquiditymentioning

confidence: 99%

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This work analyses the relationship between the stock market liquidity and the country's economic development, which has been object of interest of many researches lately. The stock market liquidity is considered to have a huge impact on a country's economic development. However, all the known studies focused on the economic growth as proxy for the economic development, instead of using a composition of various dimensions to explain the true economic development of a country.Therefore, the main aim of this work is to contribute to this branch of the literature by using the Human Development Index as proxy for the economic development. The stock market liquidity was calculated based on the Amihud's (2002) illiquidity measure, which is one of the most reliable measures of this area.This study was carried out based on a wide and diversified sample with 59 countries.The sample period is comprised between 1990 and 2015, with annual frequency data. Firstly, the correlations between the stock market liquidity and economic development are calculated for each country using the Spearman's non-parametric correlation test. Then, were applied the pooled OLS and fixed and random effects regression models, being the most suitable model then chosen through the F, Breusch-Pagan and Hausman tests. When analysed individually, most of the countries have a positive correlation coefficient between the stock market liquidity and economic development, which is consistent with the statistically significant positive relationship when analysing the global sample. Dividing the original sample by the level of economic development of the countries and by the period before and after the economic crisis of 2008, there are statistically significant changes in the impact of the stock market liquidity on the countries' economic development. Only the developing countries presented a statistically significant negative relationship between the two analysed dimensions, contrary to the initial expectations. Still, this result may be related to the greater difficulties in the transaction of assets, reducing liquidity and slowing down economic growth.

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